Finding the right life insurance coverage involves a process where one needs to calculate the actual financial needs of their own as well as family members.
One of the most common ways to calculate how much insurance one requires is Need Based Analysis. The needs analysis is also called the family needs approach, the total needs approach, or the needs approach.
It is based on the assumption that the goal of life insurance is to cover the surviving family members’ immediate expenses after the insured family member’s death, along with their ongoing expenses into the future. It aims at the income and cash needs that must be met following an individual’s premature death and compares those needs to resources already available.
This approach classifies the needs and decides their priorities. Individual and family needs to be assessed, along with the current and estimated ones. Need based approach estimates minimum economic support through life insurance. Need analysis takes into consideration the actual needs of the dependents
Immediate Needs at Death
Ongoing and Monthly
Lump-sum needs occasioned by certain specific events like child’s higher education, marriage or travelling.